Essay about Assignment 3: Evaluating Financial Performance- The Corner Café

Submitted By huhluvdc
Words: 1332
Pages: 6

The Corner Café
Introduction to Business

Abstract
This paper will go over the balance sheet and income statement for the Corner Café. The balance sheet pinpoints the weaknesses and problem areas within the company. The balance sheet includes the breakdown of the current assets, the total liabilities, and the owner’s equity.
The income statement shows how the café performs over a certain period of time. The income statement takes all of the cafés expenses into account from the inventory to marketing and advertising. The cafés financial performances with be examined and analyzed. The financial performances include revenue, profitability, and the ability to pay operational expenses based on the information provided on the financial statements. Based on the financial statements provided, the restaurant has room for improvement. Suggestions will be made as to how the financial performance of the café could be improved. There are many different factors that could improve the restaurant like expanding the menu, hosting events or using social media for networking, just to list a few (

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The Corner Café In review of the Corner Cafés balance sheet from years 2011 and 2012, the company has had an overall increase in total assets, total liabilities and owners’ equity. The information that was provided is useful not only for the prediction of future income but it also provides information for important decision making strategies. In running a business it is very important to manage the finances wisely. Even though the total assets are higher than the total liabilities, there are still some areas that need to be addressed. The Corner Cafés balance sheet and income statement will be broken down including the revenue, profitability, and the ability to pay the operational expenses. Ways that this restaurant can be improved would be to invest in more training for the employees, cutting down on other operational expenses, and keeping the accounts payable amount higher than what it is. Revenue is the total income produced by a given source the gross income returned by an investment (Merriam-Webster).When one looks at the Corner Cafés Income Statement for the year ending December 31, 2013 the revenue is $500,000. It does not have anything to do with profit. The revenue figure is important because a business must bring in money to turn a profit. If a company has less revenue, it's going to make less money. The total current assets for year 2012 are 70,500. Which are 36,500 higher than year 2011, which were 34,000. The current assets include cash and other assets that are expected to be turn into cash or utilized within the coming year. The Corner Café had an average of $57,500 cash on hand at the end of 2012. In year 2011 there was $30,000; showing 2012 had an increase of $27,500. There is other components that make up the current assets including accounts receivables, inventory and prepaid expenses. Accounts Receivable is the money due from all customers for merchandise or services delivered on credit. (Entrepreneur, 2013). If a company has receivables, this means it has made a sale but has not collected the money for it yet. The café had a total of $5,000 in account receivable at the end of 2012, $3,000 more than it was in 2011. Inventory is the merchandise that a company owns but has not sold. The Corner Café is consistent with keeping the inventory in the low thousands. In this type of business inventory can lose value or can no longer be used due to the age of products. This could be a serious concern for the café, since they sell perishable goods and products. Prepaid expenses are not really important. The business could have prepaid rent, utility bills, or taxes. Profitability is the primary goal of any business venture. Without profitability the business will not last for the long…